Most startup founders face the challenge of fundraising at some point in their business’s lifetime. For some, it happens naturally and easily through a well-built network, event participation or pitch competition. For others, attracting investment is a more challenging endeavour. And pitching your idea to investors regardless if they are bankers, VCs or angels, can be intimidating.
There certainly are multiple resources where one can find recommendations and do’s and don’ts of fundraising. Over the years, we’ve seen that some of the most valuable insights are coming from those who are directly in charge of providing investment and have attended pitches with startups.
So, here is a list of the five most important things that an investor wants to know before sinking money in a company.
1. Financial performance
You need to know your numbers. Prove to potential investors that your company has excellent financial performance, especially if you are seeking funding from a bank. In short, wenture capitalists will look for a potential of high returns and a clear exit opportunity. Likewise, prepare to answer questions about the financial stability of your company.
2. Background and environmental impact
Investors look for experienced entrepreneurs and management teams with a track record of high performance and leadership in the company’s industry or in prior ventures. Most investors will research your business experience and your background in the industry. Passion and commitment should be evident to inspire confidence in investors and stakeholders.
3. Personalized communication & Company uniqueness
Your product or services need to be unique. Prove to your investors, with concrete evidence, that your market potential is big enough to make investing worthwhile. Moreover, work out how to personalise your approach as much as possible.
4. Effective business model
Your company will start to display its strategic value as soon as it begins to generate profits. Present the business model that you are currently using and prove that it will help your company become more profitable. Different types of investors seek different attributes from a business plan. It’s important to customize your business plan and pitch to each investor. For example, venture capital fund managers and angel investors tend to put more emphasis on both market and finance issues, so those are areas that you should focus on when approaching these types of investors.
5. A change-maker mindset
Investors look for companies that really want to change the industry and where they can add value with their capital and network. The larger and more stable customer base that your brand has, the stronger competitive advantage you will have when pitching to investors. However, investors arent just excited about companies changing large industries, but also about niche sectors within an industry. Passion and commitment should be evident to inspire confidence in investors and stakeholders.